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CFPB Utilizes “” Secret Shoppers”” To Fight House Loan Lending Discriminations

November 4, 2016 - Author: Bradley - Comments are closed

On July 25, the United States District Court for the Northern
District of Mississippi signed a permission order amongst BancorpSouth,
the United States Department of Justice, and the Customer Financial
Security Bureau, whereby BancorpSouth agreedconsented to pay an aggregate
of $10.6 million and to stick to non-monetary charges occurring
from the DOJ # 39; s and CFPB # 39; s allegations that BancorpSouth
broke the Equal Credit Opportunity Act (ECOA) by
participating in prejudiced financing practices against minority
debtors. The federal government discoveredfound out about the ECOA offenses
through its use of secret buyers. The $10.6.
million settlement is made up of: (1) a $2.8 million payment that.
will be placed in an interest-bearing escrow account for impacted.
consumers; (2) a minimum of $300,000 that BancorpSouth must spend.
on targeted advertising and outreach to majority-minority.
neighborhoods (locations in which one or more racial and/or ethnic.
minorities, relative to the basic population, comprise a majority.
of the local population) in Memphis, Tennessee; (3) $500,000 that.
will be used in a partnership with community-based organizations to.
inform minorities in Memphis about their credit; and (4) a $3.
million penalty payable to the CFPB.

The non-monetary charges consist of needing an independent.
compliance management expert to evaluate BancorpSouth # 39; s.
compliance with federal home loan financing rules and notify the CFPB.
about BancorpSouth # 39; s compliance management systems. After.
notifying the CFPB about the compliance concerns, BancorpSouth is.
needed to submit a plan to repair the exposed concerns and submit a.
report to the CFPB on how BancorpSouth plans to abide by the.
ECOA and the Fair Housing Act. BancorpSouth should likewise extend.
to rejected applicants, as identified by the CFPB, a deal to apply.
for a mortgage at a lower rates of interest than exactly what it at first.
supplied to the candidate. Finally, BancorpSouth is needed.
to open a branch or loan office in a majority-minority community.
in Memphis.

The Complaint and Permission Order are the result of the use of.
mystery shoppers a program that the Bureau has.
been using in addition to its evaluations of banks within its.
supervisory jurisdiction. The mystery shoppers target banks.
in order to determine whether the banks are taking part in.
discrimination versus minority borrowers. The Bureau # 39; s.
Problem against BancorpSouth alleges that the Bureau conducted an.
investigation where the Bureau sent out two people one.
white, the other black into a BancorpSouth branch to obtain.
a loan. Inning accordance with the Problem, the bank # 39; s employees.
guided the black client to a more expensive loan plan despite.
the fact that their stated income and credit scorecredit rating were higher than.
that of the white candidate. The CFPB declared several other.
prejudiced practices at the bank, consisting of redlining in.
Memphis, discrimination in underwriting specific home loans,.
discrimination in pricing certain home loans, and the implementation.
of a clearly discriminatory denial policy.

A government firm # 39; s use of mystery buyers as undercover.
operatives is uncommon in civil enforcement cases due to the fact that of public.
issues and limits imposed by the 1974 Privacy Act. The.
Personal privacy Act requires federal government officials to identify themselves in.
their official capacities before seeking details from.
people. The CFPB has mentioned that the Privacy Act does.
not use to secret consumers since the buyers look for details.
that is offered to the public and does not seek personal.
info about people.

The CFPB # 39; s usage of secret shoppers to search for ECOA.
infractions reveals that the Bureau does not believe that.
supervisory examinations and investigations are adequatesuffice to.
figure out whether a bank is complying with the federal laws that.
the Bureau enforces. Offered that the Bureau openly welcomes.
this method and does not think that the Privacy Act applies, it.
appears that the Bureau # 39; s usage of mystery buyers and.
undercover examinations will likely increase in the future.

The Troutman Sanders # 39; Consumer Financial Solutions.
Law Monitor blog offers prompt updates concerning the monetary.
services market to notify you of current changes in the law,.
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The material of this short article is planned to supply a basic.
guide to the subject matter. Specialist guidance need to be sought.
about your specific circumstances.

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